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Effective credit management involves establishing credit standards for extending credit to customers, determining the company's terms of credit, and setting up procedures for invoicing and collecting past-due accounts. The following statement refers to a credit management policy. Select the best term to complete the sentence. A company's to the conditions of the credit sale, induding cash discounts and due dates Consider the credit terms refer hy. The financial managers at the Capel Company have been monitoring the company's receivables and have compiled the credit standards refer collection policy refers • All sales are on credit. Capel's current terms are 2/10 net 30. . 10% of Capel's customers take advantage of the discount • Payments from its remaining customers are received, on average, in 53 days. • Estimated credit sales are $160,000 million annually. • Variable costs are 82% of gross sales. • Credit evaluation and collection costs are 10% of gross sales, . There are no bad debts to consider in this analysis
Using the preceding information, fill in the blanks in the following analysis: 2/10 net 30 48.7 days 243.4150138.1 Credit Analysis 1. General Credit Policy Information Credit terms Days sales outstanding (DSO) for all customers DSO for customers who take the discount (10%) DSO for customers who forgo the discount (90%) II. Annual Credit Sales and Costs ($ millions) Gross sales Net sales Amount paid by discount customers Amount paid by nondiscount customers Variable operating costs (82% of gross sales) 10 days 53 days e and $160.000 159.680/1281159.990/156.800 IS.60 2.800 115.670 $144.000 $131.20 Bad debts $0.00 Credit evaluation and collection costs (10% of gross sales) $16.00 Grade It Now Save &